Do indirect equity holders of a business entity franchisee need to sign the Kidokinetics Non-Disclosure and Non-Compete Agreement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Your Manager and all other managerial personnel who will have access to our proprietary and Confidential Information and training must sign our Non-Disclosure and Non-Compete Agreement, which is attached to our Franchise Agreement as Attachment F. Additionally, if you are a business entity, all of your officers, directors, and direct and indirect equity holders, and those of any business entity that directly or indirectly controls you must sign the Non-Disclosure and Non-Compete Agreement.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD page 39)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, if the franchisee is a business entity, all officers, directors, direct equity holders, and indirect equity holders must sign the Non-Disclosure and Non-Compete Agreement. This requirement also extends to those of any business entity that directly or indirectly controls the franchisee. This agreement is attached to the Franchise Agreement as Attachment F.
This means that if you plan to operate your Kidokinetics franchise through a corporation, LLC, or other business entity, not only will the direct owners and managers be bound by the non-disclosure and non-compete terms, but also anyone with an indirect financial stake in the franchise's parent company. This is a stricter requirement than some franchises, which may only require signatures from direct owners or managing members.
For a prospective Kidokinetics franchisee, this has significant implications for structuring their business. It is essential to identify all direct and indirect equity holders early in the process and ensure they are willing to sign the agreement. Failure to comply with this requirement could delay or prevent the franchise from being awarded. Additionally, any future changes in ownership structure must also comply with this requirement, potentially complicating ownership transfers or investment rounds.